Member Briefing March 3, 2025
Trump Plans Tariffs On Mexico And Canada Beginning Tomorrow, While Doubling Existing 10% Tariffs On China
President Donald Trump plans to impose tariffs on Canada and Mexico starting Tuesday, in addition to doubling the 10% universal tariff charged on imports from China. In a Truth Social post Thursday, Trump said illicit drugs such as fentanyl are being smuggled into the United States at “unacceptable levels” and that import taxes would force other countries to crack down on the trafficking.
The prospect of escalating tariffs has already thrown the global economy into turmoil, with consumers expressing fears about inflation worsening and the auto sector and other domestic manufacturers suffering if Trump raises import taxes. The 25% tariffs on Mexico and Canada would amount to a total tax increase on the U.S. public of somewhere between $120 billion to $225 billion annually, according to Jacob Jensen, a trade policy analyst at the American Action Forum, a center-right think tank. The additional China tariffs could cost consumers up to $25 billion. But Trump campaigned on imposing broad tariffs, which he plans to launch on April 2 by resetting them to match the taxes that he determines are charged by other countries on American goods.
Consumer Retrenchment in Goods Spending, Inflation Mild
Inflation rose at only a mild pace in January and income rose more than twice the expected amount. But inflation-adjusted spending dropped half a percentage point, the biggest monthly retrenchment in almost four years. A pullback in autos and other goods was mostly to blame. Here are some key takeaways from January's personal income and spending report released Friday:
- The PCE deflator, rose 0.3%, which was enough to drive the year-over-year rate lower to 2.5%.
- Goods inflation (+0.5%) outpaced services inflation (+0.2%) for the first time in at least six months.
- The core measure (excluding food and energy) was up a similar amount in January, which drove the annual rate down to 2.6% from an upwardly revised 2.9% in December.
- On a three-month average annualized basis, core inflation sits at 2.4% today.
- Personal income came in hot growing 0.9% which was more than double the expected gain of 0.4%.
- Spending fell on both a real and nominal basis. The decline is the first in 22 months though it does come on the heels of upward revisions to December data.
- The bottom dropped out beneath motor vehicles & parts spending with a $41.1 billion dollar decline.
- The pop in overall income is partially attributable to the annual cost of living adjustment (COLA) to social security, which drove this portion of income up 2.8%.
Durable Goods Orders Rise Ahead Of US Tariffs
A key measure of business orders rose in January for the third month in a row. But it’s likely the sudden improvement reflects businesses rushing to buy parts and supplies ahead of potential U.S. tariffs. So-called core durable-goods orders climbed 0.8% last month, the government said Thursday. These orders omit the military and transportation and are seen as a proxy for how much businesses are investing, a key source of economic growth. Total U.S. orders for durable goods, meanwhile, increased by 3.1% in January after a surge in bookings for Boeing aircraft. The company’s plane orders can cause big swings month-to-month in the headline number.
Orders minus transportation, a less volatile figure, were unchanged in January. This figure gives a more accurate view of how well businesses are performing. These orders have risen just 1.6% in the past 12 months, a very small increase that underscores the struggles of American manufacturers. They tend to rise two to three times faster in good times. Manufacturing still exerts a sizable influence on the U.S. economy, even though it’s a much smaller part of the economy than it used to be. A burst of optimism among manufacturers at the end of last year seems to have fades as they are waiting to see what the Trump White House does, ushering in a period of uncertainty.
Global Headlines
Middle East
- Israeli Military Inquiry Says It 'Failed To Protect' Civilians On October 7 – Reuters
- Hamas Reports No Progress In Talks With Israel On Cease-Fire’s Second Phase - Politico
- Israel Blocks Aid Into Gaza As Ceasefire Standoff Escalates - Reuters
- Getting The Israel-Hamas Ceasefire To The Next Phase Will Be Difficult. Here’s Why - AP
- Iran Threatens New Attack on Israel - Newsweek
- Iran Makes Nuclear Strides – The Dispatch
- Iran Open to Talks With Trump's U.S. - Newsweek
- Jailed Kurdish Militant Leader Calls on Followers to Disarm, End 40-Year Conflict With Turkey - WSJ
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Zelensky, Who Stood Up To Putin, Now Refuses To Bow To Trump - WSJ
- Britain And France Step In To Heal Trump-Zelenskyy Rift - Politico
- Russia’s Withering Economy Is a Tricky Place to Do Deals—Even for Trump – WSJ
- Can Europe Deter Russia In Ukraine Without US Military? - BBC
- Murkowski slams Trump administration over Russia-Ukraine war stance: ‘Sick to my stomach’ – The Hill
- Deadly Russian Weapons Being Jammed in Ukraine - Newsweek
- UK And France To Discuss Ukraine Plan With Trump, Says PM - BBC
- Trump Admin Kicks Russian State News Agency Out of Zelensky Meeting - Newsweek
- Captured North Koreans Describe Fighting for Russia in a War They Didn’t Understand - WSJ
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- Greece Says EU’s Central Bank Could Play Role In Europe’s Defense Crisis - Politico
- Austrian Parties Reach Deal to Form Government Without Far Right - NYT
- Trump Pharma Tariff Seen As Needle Prick For China, Disruptive For U.S. – Nikkei Asia
- US HIV Funding Cut Is 'Wake-Up Call' For S Africa - BBC
- France Likens EU Plans To Save Its Industry To Paltry ‘Homeopathic Remedies’ - Politico
- China February Manufacturing Hits 3-Month High, But US Tariff War Clouds Outlook - Reuters
- Japan January Factory Output Falls 1.1% Month-On-Month - Reuters
- 'End Of Era' For Africa As Namibia Buries Founding Father - BBC
- Oil Climbs More Than 2% After Trump Cancels Chevron's Venezuela Licence - Reuters
- Japanese Birth Rate Falls To All-Time Low As Deaths Hit Record High – AP
Policy and Politics
Where Things Stand As Congress Tries To Avoid A Partial Government Shutdown In Two Weeks
With Republicans now in charge of the White House and Trump sidestepping Congress on previous funding decisions, a more contentious dynamic has emerged during negotiations, raising questions about whether lawmakers will avoid a shutdown this time. Here’s a look at where things stand.
First things first: How much to spend? The stage for the current negotiations was set nearly two years ago when then-House Speaker Kevin McCarthy and then-President Joe Biden worked out a two-year budget deal that would essentially hold non-defense spending flat for 2024, while boosting it slightly for defense. The agreement provided for 1% increases for both in 2025. Democrats want to adhere to that agreement, which would bring defense spending to about $895.2 billion and non-defense to about $780.4 billion. Republicans are looking to spend less on non-defense programs. Cole has argued Republicans are not bound to an agreement negotiated by two men no longer in office.
With Trump and Musk slashing government, Democrats want guarantees. Trump pushed early to pause grants and loans potentially totaling trillions of dollars while his administration conducted an across-the-board review of federal programs. A subsequent memorandum purported to rescind the pause. The U.S. Constitution grants Congress the power to appropriate money and requires the executive to pay it out. A 50-year-old law known as the Impoundment Control Act makes that explicit by prohibiting the president from halting payments on grants or other programs approved by Congress. Democrats have sought to place in the spending bill some guarantees the administration would follow what Congress intended. But Republicans are making clear that’s a non-starter.
Health Care Accounted For One Quarter Of All Federal Spending In Last Fiscal Year
Health care is an inviting target for budget cutters in Washington. One of every four dollars in federal spending in fiscal year 2024 was used to pay for health programs and services. The next-largest categories are Social Security (21%), national defense (13%) and interest payments on the national debt (13%). Combined, these four categories account for nearly three-quarters of all federal spending. Researchers analyzed current support from the federal government for health programs and services. The key takeaways include:
- The federal government spent $1.9 trillion on health care programs and services in fiscal year 2024 (27% of all federal outlays), which collectively is the largest category of federal spending.
- Forgone tax revenues to the federal government resulting from tax subsidies for employer-sponsored insurance coverage and a portion of the ACA premium tax credits together totaled $398 billion.
- More than 80% of all federal support for health programs and services, including spending and tax subsidies, goes to programs that provide or subsidize health insurance coverage. This includes 36% going to Medicare, 25% to Medicaid and CHIP, 17% to employment-based health coverage and 5% to subsidies for ACA coverage.
- Discretionary spending is a relatively small component of overall federal support for health programs and services. More than half (or $128 billion) of discretionary health spending paid for hospital and medical care for veterans. Discretionary health spending also provides funding for agencies such as the National Institutes of Health and the Centers for Disease Control and Prevention (CDC) (4%), as well as global health.
Bezos Focuses Washington Post Opinion Section On Free Markets And Liberties
Washington Post owner Jeff Bezos has announced that the newspaper's opinion section will focus on supporting “personal liberties and free markets", and pieces opposing those views will not be published. The move, which marks a major shift away from the section's broad opinion coverage, prompted the outlet's opinion editor David Shipley to resign.Bezos, the billionaire founder of Amazon, sent a memo to staff on Wednesday which he also posted to X. “We are going to be writing every day in support and defence of two pillars: personal liberties and free markets,“ Bezos said.
According to the Washington Post, Will Lewis, the outlet’s chief executive, said in a memo to staff that the changes to the opinion section were "not about siding with any political party. This is about being crystal clear about what we stand for as a newspaper," he said. A Washington Post article announcing the change, some subscribers wrote in the comment section criticising the decision, and others said they would be cancelling their subscription. As of Sunday morning nearly 75,000 subscribers had dropped their subscription.
Trump’s First 100 Days
- Americans Say Trump Changing How Government Works, But Divide Over Musk, Workforce Cuts — CBS News Poll
- Judge Rules Trump’s Firing Of Federal Workforce Watchdog Was Illegal - Politico
- GSA Tells Agencies To Target Top 10 Consulting Firms For Cuts – Federal News Network
- White House Touts Arrests of Violent Migrants, but Trump’s Crackdown Is Much Broader - WSJ
- Trump Administration, Musk’s DOGE Plan To Fire Nearly All CFPB Staff And Wind Down Agency, Employees Say - CNBC
- USAID Workers Say Goodbye To Headquarters As Trump Drastically Cuts Foreign Aid - Reuters
- Trump’s Tariff Onslaught Is Coming Faster Than His Team Can Carry It Out - WSJ
- Trump To Make English Official US Language, White House Official Says - Reuters
- US Senate Panel Advances Trump's Labor Secretary Pick Chavez-DeRemer's - Politico
- Ex-Gov. Andrew Cuomo Enters Race For New York City Mayor – NY State Of Politics
- The Trump Tracker: Keep Tabs On The Latest Announcements And Executive Orders - WSJ
Health and Wellness
US Flu Season May Have Reached Its Peak, CDC Says
The worst flu season the United States has had in more than a decade may have reached its peak, according to the US Centers for Disease Control and Prevention. Data published by the agency on Friday shows that flu activity is still elevated but has decreased for two consecutive weeks. There were more than 6 flu hospitalizations for every 100,000 people in the US during the week ending February 22, according to CDC data. That’s less than half as many as there were two weeks earlier, but still more than there have been at this point in the season in at least 15 years – and respiratory illness activity was high or very high in all but 11 states last week.
Vaccination can help prevent against severe outcomes from flu, but vaccination rates were low this season. Only about 45% of adults and children got their flu shot this season, CDC data shows, well below the federal target of 70%. On Thursday, the CDC published data showing that the flu vaccine was between 63% and 78% effective at preventing hospitalization among children this season and between 41% and 55% effective at preventing hospitalization among adults.
Industry News
US GDP Held Steady While Inflation Marked Higher at End of 2024. Atlanta Fed GDP Tracker Flashes Warning for 2025.
U.S. economic growth slowed in the fourth quarter, the government confirmed on Thursday, and the loss of momentum appears to have persisted early this quarter amid cold temperatures and concerns that tariffs will hurt spending through higher prices. Gross domestic product increased at a 2.3% annualized rate last quarter after accelerating at a 3.1% pace in the July-September quarter, the Commerce Department's Bureau of Economic Analysis (BEA) said in its second GDP estimate for the fourth quarter on Thursday. Upgrades to government spending and exports were partly offset by downward revisions to consumer spending and investment. Nonetheless, consumer spending, which accounts for more than two-thirds of the economy, grew at a 4.2% rate last quarter after rounding, matching the previously estimated pace.
Separately the Atlanta Fed’s GDPNow tracker of incoming data is indicating that gross domestic product is on pace to shrink by 1.5% for the first quarter. While the tracker is volatile through the quarter and typically becomes more reliable much later in the quarter, it does coincide with some other indicators showing a growth slowdown. Fresh indicators showed that consumers spent less than expected during the inclement January weather and exports were weak, which led to the downgrade. Prior to Friday’s consumer spending report, GDPNow had been indicating growth of 2.3% for the quarter.
Lilly Plans To Invest $27 Billion In New US Plants As Trump Threatens Pharmaceutical Tariffs
Eli Lilly plans to spend at least $27 billion to build four new manufacturing plants in the U.S., the drugmaker said at a Washington press conference on Wednesday, as it grapples with the threat of drug import duties from the Trump administration. The new plants will be built over the next five years, and are expected to create more than 3,000 jobs for skilled workers like engineers and scientists as well as 10,000 construction jobs, the company said. Lilly said it will announce the locations of the sites later this year.
The announcement comes less than a week after U.S. President Donald Trump met with chief executives from major drugmakers, including Lilly CEO David Ricks, to discuss industry concerns such as tariffs on drug imports. The CEO said in a statement earlier on Wednesday that tax-cutting legislation introduced in Trump's first term had been foundational to the drugmaker's domestic manufacturing investments. Lilly, which has become the world's most valuable healthcare company worth more than $855 billion, said it has already committed $23 billion to boosting its U.S. manufacturing footprint since 2020. Its Wednesday announcement brings that total to more than $50 billion. Three of Lilly's new plants will be used to manufacture pharmaceutical raw ingredients, while the fourth will make injectable medicines, the drugmaker said.
Read more and view the maps at Reuters
Stellantis Earnings: 70% Profit Drop In 2024, Sees Return To Growth In 2025
A year ago, Big Three automaker Stellantis warned of a “turbulent” year ahead. The company probably had no idea how true that would be. Slumping sales, bloated inventory, and a disagreement about the direction of the company led to CEO Carlos Tavares’s resignation. And when Stellantis — which owns Ram, Jeep, Dodge, and other brands — released full-year results on Wednesday before the bell, it mostly painted the dire picture analysts were expecting.
Stellantis posted full-year revenue of 156.9 billion euros (roughly $164.5 billion), down 17% from last year. Full-year profit was down a whopping 70% from last year — 5.5 billion euros, or nearly $5.8 billion — and below analyst estimates. The company said it expects to return to growth in 2025. It said it expects positive net revenue growth and industrial free cash flows. Stellantis said it would build a new midsize pickup truck at the recently shuttered Belvidere, Ill., assembly plant. In addition, the company will move forward with plans to build the next-generation Dodge Durango SUV at its Detroit Assembly Complex. There had been rumors that Stellantis would move Durango production to Canada.
Nvidia Rides High On Auto-Driven AI Demand
Nvidia’s revenue for Q4 of its fiscal year 2025 spiked 78% year over year to $39.3 billion, as demand for its Blackwell GPU chip continues to soar, according to an earnings report this week. The semiconductor giant saw particular growth in its automotive segment, for which revenue climbed 103% YOY to $570 million, thanks to chip demand in autonomous vehicles.
The company is revving Blackwell production to keep up with the demand growth, with 350 plants manufacturing the 1.5 million components that go into the chips. “We’re going to have to continue to scale as demand is quite high, and customers are anxious and impatient to get their Blackwell systems,” President and CEO Jensen Huang said on an earnings call Wednesday. The company is also already preparing to launch the next iteration of the GPU, Blackwell Ultra. “The next train is on an annual rhythm and Blackwell Ultra with new networking, new memories and of course, new processors, and all of that is coming online,” Huang said.
Read more at Manufacturing Dive
FAA Certifies New Pratt & Whitney Engine
The U.S. Federal Aviation Administration granted type certification to Pratt & Whitney’s new GTF Advantage geared turbofan engine, confirming that it meets airworthiness, noise, and emissions standards for commercial aerospace. A redesign of the PW1100G version of the high-bypass turbofan GTF engines, the Advantage will be the production standard for the series, variants of which power the Airbus A220 and A320 aircraft and Embraer E-Jet E2 series jets.
Geared turbofan engines are designed so that the fan and turbine spin at different speeds, to achieve fuel efficiency and noise reduction. Pratt & Whitney introduced the GTF engines in 2016, and initiated the GTF Advantage design update in 2021. It reports that the new engines were subjected to more than twice the number of tests as the current GTF engine model. Among other improvements, the GTF Advantage features “redesigned life-limited parts and technological enhancements throughout the gas path” that make it more durable than the current version.
Read More at American Machinist
Humanoid Robots Finally Get Real Jobs
In a large, brightly lit warehouse in Flowery Branch, Ga., a pair of human-shaped robots made by Agility Robotics tiptoe across polished concrete floors, their gait oddly mincing. Their legs end in narrow, hoof-like feet sheathed in custom nonslip shoes. They stoop to retrieve bins full of Spanx shapewear, then carry them to a nearby conveyor belt.
While their jobs may be straightforward and menial, these “Digit” robots are a direct replacement for the humans who would otherwise be doing this work. They are also a flexible bridge between the other less versatile automated machines common in warehouses and factories. In this way, a humanoid robot like Digit represents the next step—in an evolution that stretches back to the invention of the assembly line—in the speedup and automation of processes essential to e-commerce, manufacturing, agriculture and every other part of our physical and built environment.
Alcoa CEO: Tariffs Would Decimate Aluminum Sector, Not Protect It
Alcoa, a metals producer that many assume would benefit from President Donald Trump's proposed 25% tariff on imported aluminum, hates that idea. The company's president and CEO said Tuesday that tariffs on Canadian aluminum would lead to the loss of 20,000 jobs in the sector as well as another 80,000 jobs being lost indirectly.
Speaking to the 2025 BMO Global Metals, Mining & Critical Minerals Conference being held in South Florida, Bill Oplinger said that the Trump administration following through with its plan to impose steep tariffs on steel and aluminum products would be a clear negative for the sector. That stance sets him apart from leading steel executives such Nucor Corp.’s Leon Topalian and Cleveland-Cliffs Inc.’s Lourenco Goncalves, who have said the trade measures would level the global playing field. “We’re clearly advocating based on the fact that this is bad for the aluminum industry in the U.S., it's bad for American workers,” Oplinger said. “We’re advocating with the administration to, at a minimum, get a Canadian exemption.”
US Firm Firefly Scores Its First Moon Landing With Blue Ghost Spacecraft
WASHINGTON (Reuters) -Firefly Aerospace succeeded in its first attempt to land on the moon with its uncrewed Blue Ghost spacecraft on Sunday, kicking off a two-week research mission as a handful of private firms compete to reach the frontlines of a global moon race. The size of a compact car, the four-legged Blue Ghost carried 10 scientific payloads as it touched down at around 3:35am ET (0835 GMT) near an ancient volcanic vent on Mare Crisium, a large basin in the northeast corner of the moon's Earth-facing side.
Five nations have made successful soft landings in the past - the then-Soviet Union, the U.S., China, India and, last year, Japan. The U.S. and China are both rushing to put their astronauts on the moon later this decade, each courting allies and giving their private sectors a key role in spacecraft development. Blue Ghost flew on a winding path over three times around Earth, totaling roughly 2.8 million miles, to get to the moon some 238,000 miles (383,000 km) from Earth, reaching the surface a month and a half after launching atop a SpaceX rocket from NASA's Kennedy Space Center in Florida.